Question

Bond Amortization Scenario 2: In 1/1/2015 Big Sky Resort issued $10,000,000,4%, 3year bonds, due 1231/2017. Intere June 30th & December 31st. At the time of issue, the market rate for similar bonds l .merest is paid semi-annually the market rate for smlar bond issues was 2% Show and label your work Calculate the issue price present value of the bond proceeds. round to nearest dolari Face value 10,000, Dob 10.000 on coupon amount - 3150,00 Colok - 67. Nolo Logo 3 37. 6 - issue price > 812,7872 Complete the bond amortization table below. (round to the nearest dollar) :) Prepare the accounting journal entries for the bond issue on the Journal Entry Sheet Uhamortized Cash Payment Bond Carrying Value Interest Expense Bond Par Maturity) Value Date Amortization 01/01/15 1579547 6510, 579,546,65 1000oboo 06/30/15 200 000 105,795.48 94.204.52 485,212104,851451 10,00 Roo 12/31/15 200.000 104.853.41 95.146.57 140.196,56 103/90146, 58 1 0 00 06/30/16 2.00 000 13.9018796,099.09 294,099.52 102,94 0986 t od ogoo 12/31/16 100,000 102.940.90 07. 04.01 197,019,5 1,910 3451 to 0,ood ood 10,099.009.0 00, odo,000 06/30/17 200,000 101.970,40 98.029.60 99.009,9 0 1.000.000.00 10.000.000,00 12/31/17 200 000 100.990. id 90009.90 page 4

the numbers i am sure if its right or wrong but i definetly need help for journal entry part as well

Answer 1

1) Issue Price of bond is equal to sum of present value of semiannual interest payments and present value of redemption value of bonds at the the end of bond life discounted at market rate (i.e. 2%).

Relevant market rate for discounting = 2%*6/12 = 1%

No. of periods = 3 years*2 semi annual period = 6 periods

Semi annual interest paid in cash in bonds = $10,000,000*4%*6/12 = $200,000

Present value of interest payments = Interest payments*PVAF(1%, 6)

= $200,000*5.7954765 = $1,159,095

Present value of redemption amount = $10,000,000*PVF(1%, 6)

= $10,000,000*0.9420452 = $9,420,452

Issue Price of Bonds = PV of interest payments+PV of redemption value

= $1,159,095+$9,420,452 = $10,579,547

2) Bond Amortization Table (Amounts in $)

Date	Cash Payment (A)	Interest Expense (bond carrying value*1%) (B)	Amortization (C = A-B)	Unamortized (beg bal - C)	Bond Carrying Value	Bond Par Maturity Value
01/01/15				579,547	10,579,547	10,000,000
06/30/15	200,000	105,796	94,204	485,343	10,485,343	10,000,000
12/31/15	200,000	104,854	95,146	390,197	10,390,197	10,000,000
06/30/16	200,000	103,902	96,098	294,099	10,294,099	10,000,000
12/31/16	200,000	102,941	97,059	197,040	10,197,040	10,000,000
06/30/17	200,000	101,970	98,030	99,010	10,099,010	10,000,000
12/31/17	200,000	100,990	99,010	0	10,000,000	10,000,000

3) Journal Entries (Amounts in $)

Date	Account Titles	Debit	Credit
01/01/15	Cash	10,579,547
	Bonds Discount		579,547
	Bonds Payable		10,579,547
	(To record issue of bonds payable)
06/30/15	Interest Expense	105,796
	Bonds Discount	94,204
	Cash		200,000
	(To record the interest expense)
12/31/15	Interest Expense	104,854
	Bonds Discount	95,146
	Cash		200,000
	(To record the interest expense)
06/30/16	Interest Expense	103,902
	Bonds Discount	96,098
	Cash		200,000
	(To record the interest expense)
12/31/16	Interest Expense	102,941
	Bonds Discount	97,059
	Cash		200,000
	(To record the interest expense)
06/30/17	Interest Expense	101,970
	Bonds Discount	98,030
	Cash		200,000
	(To record the interest expense)
12/31/17	Interest Expense	100,990
	Bonds Discount	99,010
	Cash		200,000
	(To record the interest expense)
12/31/17	Bonds Payable	10,000,000
	Cash		10,000,000
	(To record the redemption of bonds)